Subject: Service
Tax liability on institutes like IITs or IIMs charging fee for campus
interviews -reg.

Educational
institutes like IITs and IIMs charge a fee from prospective employers like
corporate houses / MNCs, who come to these institutes for recruiting candidates
through campus interviews. A doubt has arisen as to whether these educational
institutes fall in the category of ‘manpower recruitment or supply agency’ and
accordingly, whether service tax is leviable on this fee.

2. As
per the provisions of the Finance Act, 1994, the ‘taxable service means any
service provided or to be provided to a client, by a manpower recruitment or
supply agency in relation to the recruitment or supply of manpower,
temporarily or otherwise, in any manner’. The definition of ‘manpower
recruitment or supply agency’, prior to 1.5.2006, was, “any commercial
concern engaged in providing any service, directly or indirectly, in any
manner for recruitment or supply of manpower, temporarily or otherwise, to a
client.” However, w.e.f. 1.5.2006, the words “commercial concern” have been
replaced by the words “any person”.

3. The issue
that requires resolution is whether such educational institutes fall within the
definition of ‘manpower recruitment or supply agency’, and if so whether they
were so covered even prior to amendment made w.e.f. 1.5.2006.

4. The issue has been
examined by the Board. A commercial concern is
an institution / establishment that is primarily engaged in commercial
activities, having profit as the primary aim. It is not one / few isolated
activities which determine whether or not an institution is a commercial
concern. It is the totality of its activity and the objective of its
existence that determines the commercial nature of an institution as an ‘entity’
or a ‘concern’. The principal activity of institutes like IITs or IIMs is to
impart education without the objective of making profit. Therefore, these
institutes cannot be called a commercial concern, even if on some of
their activities (like holding campus interviews), they charge fee.
Accordingly, these institutes were not liable to pay service tax prior to
1.5.2006 under the category of “manpower recruitment or supply service”. As
regards the period after 1.5.2006, decision should be taken after taking
into account all material facts on case to case basis.